摘要：Extending the Taylor rule, following David Romer (2001), and applying the VAR model, the author estimated the monetary policy reaction function for the Bank of Canada. The results show that the overnight rate has a positive and significant response to a shock to the output gap, the inflation gap, the exchange rate, or the lagged overnight rate. The overnight rate would rise in response to a depreciation of the Canadian dollar. The relative percents in the variance decomposition of the overnight rate in order are the lagged overnight rate, the output gap, the inflation gap, and the exchange rate. These outcomes suggest that in pursuing monetary policy by the Bank of Canada, targeting output is as important as targeting inflation. (JEL Codes: E3, E5)
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